Article

Factual Summary: To pay for a vessel purchased by a Danish intermediary for a Spanish Buyer, Bank (Issuing Bank) issued a commercial LC for USD 215,000, subject to UCP500, which was confirmed by a Danish Bank (Confirming Bank). The LC was transferred to Transferee Beneficiary. Local Bank that also handled communications and presentations advised the Transferee Beneficiary. When a second drawing for USD 75,000 was not honored, Transferee Beneficiary sued Local Bank and Confirming Bank was joined as a third party.

Transferee Beneficiary claimed that Local Bank "had undertaken responsibility...for payment of the letter of credit." Local Bank claimed that was "merely an advising bank" and further argued that the presented documents did not comply with the LC.

After a trial, the trial judge ruled against the Local Bank in favor of the Transferee Beneficiary and ordered Confirming Bank to indemnify Local Bank. On appeal by the Confirming Bank regarding only the question of the role of the Local Bank, the judgment against the Local Bank was reversed. The intermediate appellate court did not deal with the question of whether the Transferee Beneficiary had complied with the conditions of the LC. On further appeal the decision of the intermediate appellate court was upheld and the appeal dismissed.

Legal Analysis:

Parties to the appeal: The Supreme Court allowed the appellate court to consider the Advising Bank's role in the transaction, despite the fact that the only party who appealed was the Confirming Bank, holding that "a defendant which is entitled to indemnity from a third party may have no interest in disputing its own liability." The court upheld the appellate court's judgment in favor of the Advising Bank and Confirming Bank.

[ALC]

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.